Ondas Inc. (ONDS) shares took a hit on Thursday, falling more than 7% after the company's second-quarter 2026 earnings showed a loss that was wider than Wall Street had braced for. But if you look past the red ink, there's a lot going on here: revenue is exploding, the backlog is swelling, and management is talking about a defense boom that could last for years.

Let's start with the numbers. Ondas reported second-quarter revenue of $83.77 million. That's up more than 13-fold from the $6.27 million it brought in during the same quarter last year, and up 67% sequentially. Analysts had been looking for $67.97 million, so the top line was a clear beat. On a pro forma organic basis, revenue rose 85% year over year.

The bottom line, though, was less pretty. The company posted a GAAP loss of 19 cents per share, which was wider than the 5-cent loss analysts had expected. That's the kind of thing that makes investors nervous, even when the growth story is compelling.

During the earnings call, CEO Eric Brock tried to put the losses in context. He said demand for counter-drone and precision-strike systems is likely to remain strong for the "foreseeable future." Recent conflicts, he argued, have highlighted a shortage of these technologies, and he believes significantly larger inventories will be needed on a sustainable basis. That's not just a short-term blip; it's a structural shift.

Ondas is already expanding production capacity, not just for the second half of 2026, but for 2027 and beyond. The company is betting that the current geopolitical environment will keep driving demand for years to come.

Profitability And Margin Outlook

Gross profit came in at $36.1 million, with a GAAP gross margin of 43.1%. On an adjusted basis, gross profit was $42.3 million, and the adjusted gross margin was 50.4%. Those are solid numbers, but the company is spending heavily to prepare for future growth.

The adjusted EBITDA loss widened to $50.6 million, reflecting investments made ahead of expected second-half growth. Operating expenses totaled $199.1 million, which included $105.8 million in noncash expenses, primarily related to stock-based compensation, contingent consideration remeasurement, and amortization.

Management warned that gross margins could face some pressure in the second half due to product mix and excess capacity at acquired businesses. But they're sticking with their longer-term gross-margin target of more than 50%.

Orders And Backlog Climb

One of the most encouraging signs is the order flow. Ondas captured about $175 million in orders during the second quarter, and another $105 million through Aug. 10. That's a lot of business coming in the door.

Backlog stood at about $613 million as of June 30. On a pro forma basis, including DZYNE Technologies and Cyberhawk, backlog reached $757 million, up 65% sequentially. The breakdown is interesting: $300 million in precision strike, $258 million in ISR and persistent intelligence, $100 million in aerial security, and $99 million in autonomous ground systems.

Defense Programs Gain Momentum

Precision strike, in particular, is gaining traction. It generated more than $34 million in second-quarter orders. And in July, a $52.9 million Lethal Unmanned Strike order pushed aggregate orders under the U.S. Army's $982 million IDIQ contract above $240 million.

Management expects the program to contribute materially in the second half. But they're also being cautious, noting that quarterly delivery timing remains difficult to predict and that supply-chain challenges could arise as production scales.

Other notable awards included an $18.8 million ULTRA order, a $9 million IonStrike integration order, and a $4.8 million U.S. Navy SOUTHCOM contract.

Ondas Raises 2026 Revenue Outlook

Financially, the company is in a strong position. Ondas ended June with about $1.4 billion in cash, cash equivalents, restricted cash, and short-term investments. Total debt stood at just $6.4 million. That's a lot of dry powder.

Since then, the company has used about $325 million to close its DZYNE and Cyberhawk acquisitions. That's a significant investment, but it's also expanding the company's capabilities and market reach.

Looking ahead, Ondas raised its 2026 revenue outlook to $525 million to $550 million, which is above the $509.25 million analyst estimate. For the third quarter, they expect revenue of $140 million to $155 million.

Management also said it believes portfolio growth of 30% to 40% into 2027 is sustainable. If that holds, Ondas could exit 2026 at roughly a $1 billion annualized revenue run rate. And they might even hit their $1.5 billion 2030 revenue target "perhaps a couple of years" early.

That's a bold claim, but with the defense spending environment what it is, it's not entirely out of the question. The stock may be down today, but the long-term story is one of growth and opportunity.

ONDS Price Action: Ondas shares were down 7.57% at $9.035 at the time of publication on Thursday.